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Policy Implications for Iceland Melissa Johns Investment Policy Specialist, World Bank November 21, 2006 Doing Business 2007: How to reform.

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Presentation on theme: "Policy Implications for Iceland Melissa Johns Investment Policy Specialist, World Bank November 21, 2006 Doing Business 2007: How to reform."— Presentation transcript:

1 Policy Implications for Iceland Melissa Johns Investment Policy Specialist, World Bank November 21, 2006 Doing Business 2007: How to reform

2 Doing Business indicators Starting a business Dealing with licenses Employing workers Registering property Enforcing contracts Getting credit Trading across borders Protecting investors Paying taxes Closing a business 2006 2007 2008 Update of 2006 Add 20 countries - funded by Iceland How to reform - 50 case studies Update of 2007 Add Not paying bribes Add Using infrastructure

3 Starting a business in Gambia in January 2006 1. Check the uniqueness of the company name 2. Notarize the company statutes 3. Payment of stamp duty and deposit of corporate tax with commissioner 4. Register with commercial registry 5. Obtain operational licenses 6. Register with Labor department 7. Register employees for Social security 8. Make a company seal Procedures Time (Number of days) Cost (% of GNI per capita) Cost (right axis) Time (left Axis)

4 Top 30 on the ease of doing business, 2007 16.Lithuania 17.Estonia 18.Thailand 19.Puerto Rico 20.Belgium 21.Germany 22.Netherlands 23.Korea 24.Latvia 25.Malaysia 26.Israel 27.St. Lucia 28.Chile 29.South Africa 30.Austria 1.Singapore 2.New Zealand 3.United States 4.Canada 5.Hong Kong, China 6.United Kingdom 7.Denmark 8.Australia 9.Norway 10.Ireland 11.Japan 12.ICELAND 13.Sweden 14.Finland 15.Switzerland

5 OECD easiest for doing business Average ease of Doing Business in 2007

6 Poor countries regulate most

7 Comparative ranking in the OECD Ease of Doing Business 2007

8 Iceland’s overall ranking: #12 Rankings per topic Areas for reform

9 Iceland’s overall ranking: #12 TopicIceland’s Ranking World’s Highest Ranking Starting a business16Canada Dealing with licenses30 St. Vincent and the Grenadines Employing workers42United States Registering property8New Zealand Getting credit13United Kingdom Protecting investors83New Zealand Paying taxes13Maldives Trading across borders18Hong Kong, China Enforcing contracts8Denmark Closing a business13Japan

10 Procedures to enforce a contract Global leader

11 Time to register property Time to register property, days Global leader

12 What to reform in Iceland? Protecting investors –increase disclosure requirements for related-party transactions –facilitate shareholder judicial redress for damage caused to company through self-dealing Employing Workers –extend allowable duration of fixed term contracts –loosen requirements on night work –reduce mandatory notice period Dealing with licenses –privatize inspections –reduce delays for construction board approvals and occupancy permit

13 IcelandDenmarkNorway Disclosure Index477 What corporate body provides legally sufficient approval for the transaction? (0-3) 222 Immediate disclosure to the public and/or shareholders (0-2) 122 Disclosures in published periodic filings (0-2) 021 Disclosures by Mr. James to board of directors (0-2) 111 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) 001 Investor Protection Index5 6.36.7 Protecting investors compared

14 Flexible labor laws, low unemployment in Denmark Rigidity of Employment index (0-100) Unemployment (% of total labor force, 2004) Denmark United Kingdom Belgium France Spain Germany Ireland Austria Finland Portugal Sweden Italy Greece Iceland

15 Iceland’s reforms Dealing with licenses –administrative agencies were consolidated –as a result, the time required to obtain a design approval from Reykjavik construction board decreased to 33 days from 45 –total time decreased to 111 days from 123 Paying taxes –net wealth tax (.6% on net wealth) was abolished in 2005 –total tax rate decreased to 27.86% from 27.88% –number of tax payments decreased to 18 from 19

16 Top OECD (high income) reformers in 2005/06 Countries are ranked by number of reforms; countries having the same number of reforms are listed alphabetically.

17 Reform payoff: creating jobs Countries ranked by ease of doing business, quintiles HigherLower Unemployment (%) Note: Relationship is statistically significant at the 1% level and remains significant when controlling for income per capita

18 New countries added Iceland funded the inclusion of 20 new countries for Doing Business 2007: –9 in Africa Cape Verde, Comoros, Djibouti, Equatorial Guinea, Gabon, Gambia, Guinea-Bissau, Seychelles, Swaziland –9 in LAC Antigua and Barbuda, Belize, Dominica, Grenada, St. Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Trinidad and Tobago –2 in ECA Montenegro, Tajikistan

19 As a group, small states near global average Average ease of Doing Business

20 …But there is large variation Doing Business 2007 ranking

21 Small states average ranking by indicator Average ranking for small states

22 Small states did not reform much this year Percentage of countries with at least one reform, 2005/06

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